Vaibhav Global Ltd (VGL) is a global retailing company selling products through TV channels in the United States (US) and the United Kingdom (UK). These channels showcase VGL's products to customers, take orders from them and then ship the product to the customers. It operates mainly in two business segments namely - wholesale operations and retail operations.
It sells precious, semi-precious and artificial jewellery to retailers like Wall Mart and Carrefour among others from India as well as its subsidiary in Hong Kong as part of its wholesale operations. On the other hand, its retail operations include two wholly-owned TV channel subsidiary companies - one 24-hour channel running in the US and the other, a 20-hour channel running in the UK, which are involved in marketing through TV. While retail operations contributed 86% of the total revenue in FY12, the balance come from wholesale operations.
However, VGL went through a turbulent cycle during FY08 and FY09 on account of new business initiatives, high cost acquisitions and global slowdown. It suffered huge cash losses and was referred for Corporate Debt Restructuring (CDR) programme. Since then, VGL has reorganized its operations in various countries and has reported considerable improvement in performance in the last two to three years.
Not Jewellery, But A Retail Company
VGL sells its products through electronic retailing, that is, it sells through television and the Internet. This retail drive has helped VGL to enhance its brand value and come closer to the customers. VGL launched 'The Liquidation Channel' to cater to the discount market segment, which was an instant success.
The company also launched 'The Jewellery Channel' in the UK. These 'LIVE' channels can be reached out on the Internet also (www.liquidationchannel.com and www.tjc.co.uk). The company sells artificial jewellery and fashion accessories as part of its retail business.
VGL has successfully transformed into a retail company, which can be easily deciphered from the sales break-up of FY12 where the US TV Channel accounts 58.7%, UK TV Channel 28.1% and wholesale operations 13.3% of the total revenue.
We expect the company to continue focusing on retail business, which is expected to contribute 88.6% in FY13E and 90.5% in FY14E from 82.9% in FY11 and 86.7% in FY12. On the other hand, the contribution from the wholesale business is expected to decline from 17.1% in FY11 to 9.5% in FY14E.
VGL has transformed itself into a discount retail business through the TV channel from the jewellery business. This discounted model has helped the company to post remarkable growth in terms of revenue and PAT and also to survive among the biggies. VGL is expected to continue the same model where it will sell the products at a discounted rate and increase volumes by expanding its reach and providing other aligned fashion accessories.
We expect VGL's revenue to grow at a CAGR of 25.7% over FY2012-14E and PAT by 23.4% CAGR during the same period.
Valuation and Recommendations
Vaibhav Global Ltd's profitability got impacted during FY07 to FY10 as the company incurred losses on account of acquisitions at higher value and launch of TV Channels. This was further impacted by the global economic turmoil, resulting in global economic slowdown or recession.
We expect VGL to report EPS of Rs 22.6 and Rs 30.5 in FY13 and FY14, respectively. ROCE is expected to improve from 16.4% in FY12 to 22.8% in FY14E.
At a CMP of Rs 133, VGL trades at a P/E of 5.9x FY13E and 4.4x FY14E and EV/EBITDA of 4.5x and 3.5x FY13E and FY14E, respectively. The ROE for the company is expected at 23.7% and 26.6% in FY13E and FY14E, respectively.
Source: Nirmal Bang's Beyond Market
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